Bond markets seen to perk up next year

MANILA, Philippines - Fund raising activities in the debt market are expected to heighten next year due to a shift in investor preference from banks to bonds in a bid to lock in cheap, long-term funding, top executives in the country’s capital markets said.

They said low interest rates and rising inflows into fixed-income funds have triggered record bond issuance as banks cut back lending.

From a mere P8 billion in 2008, bond issuances jumped more than 12-fold to P100.86 billion so far this year.

Among these include San Miguel Brewery Inc. (P38.8 billion), Aboitiz Power Corp. (P4 billion), SM Investments Corp. (P10 billion), Robinsons Land Corp. (P10 billion), Energy Development Corp.( P12 billion), JG Summit Holdings Inc. (P9 billion), Filinvest Land Inc. (P5 billion), Bahay Bonds (P2.06 billion), Globe Telecom (P5 billion) and Megaworld Corp. (P5 billion).

“I think that companies find the 3,000 PSEi level as a good comfort level for raising capital in the market,” Philippine Stock Exchange president Francis Lim said, as he pointed out that companies would be getting good valuations for any share issuances they will be conducting.

PhilRatings president Renato H. Peronilla attributed the high demand for bond issuances to the relatively lower interest rates for bonds this year compared to previous years; liquidity in the financial system; the volatility in the global financial markets which led companies to domestic sourcing of funds; and that access to funds overseas has not been as good as before.

Lim said a recent Asian Development Bank report on bond transactions puts the total bond issuances as of September this year in East Asia, both government and corporate, at $4.2 trillion, mainly driven by a 30-percent growth in corporate debt issuances.The Philippines posted one of the highest increases in corporate bond issuances at 66 percent, next only to China.

Lim said companies that wish to expand and source financing will always seek the cheapest capital in the market.

Peronilla also explained that the stock market is currently not attractive for initial public offerings (IPOs) due to poor valuations.

Lim, however, noted that the local equities market is now seeing stock price-earnings ratios normalizing to pre-crisis levels. “Based on the current flow of listing applications that we have, whether it’s for an initial public offering follow-on offering or stock rights offering, I am confident that we will exceed multiple-fold, the level of capital raised in the equities market this year. In fact, I will not be surprised if we hit the same levels as we did in previous years,” he said.

So far this year, only one company Filipino – software developer Ripple E-Business International – went public, raising P20.1 million compared with two last year - San Miguel Brewery Inc. and Pepsi-Cola Products Philippines Inc.

Lim said the soon-to-be enacted real estate investment trust law should provide an additional boost to raising capital in the equities market, adding that “we have been getting numerous queries from property companies… and I believe that when the implementing rules are put in place, property companies would start looking at this mode for capital raising.”

The market for IPOs is expected to recover next year with at least five companies expected to list on the local bourse. Among the companies that have signified their intention to go public are Northwind Power, ACM Landholdings, Globe Asiatique Realty Holdings Corp. and Mang Inasal Philippines.